05-25-2005 Council Agenda - Laserfiche WebLink

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05/17/2005 18:02 18776885933 .eased Cell Sites. What's behind this wave of mergers and buyouts? Possibly the biggest factor driving consolidation is market maturation. According to Cellular Telephone Industry Association projections for 2005, there are approximately 170 million wireless customers in the United States. This is approximately 58 percent of the U.S. population of 293 million, and a much larger percentage of those age 12 or older. As a result, industry growth has slowed and cellular service has become a commodity. To draw in new customers, carriers have been adding new features such as camera phones and Internet access, while cutting prices to draw in new customers and lure old ones away from competitors. Another important factor is a change in Federal Communications Commission (FCC) regulations that became effective on Jan. 1, 2003. At that time, the FCC eliminated the Commercial Mobile Radio Services (CMRS) spectrum cap and cellular cross - interest rules that had previously been in effect. As a result, there are fewer restrictions an the amount of the CMRS spectrum that a single company can hold in a particular geographic area, which opened the market to the current mega - mergers. While average revenue per user has been declining due to price cutting in the face of competition, costs for cell sites continue to rise. A few years ago, when expanding cellular networks as fast as possible was a priority, generous lease agreements were signed, often with automatic escalators, or built -in annual increases. Today, cellular providers must evaluate the cost/benefits trade -offs of each available site, to optimize their overall wireless network and balance the required wireless coverage while minimizing costs. i . p 1 NCOME PER CELLULAR CUSTOMER , i1 tl z' • L ..... b,....5.. . s' \ 4`(I , ....;., COST PER CELLULAR CUSTOMER p. .,.- t L • 00 01 02 03 0 05 08 07 00 00 10 PAGE 07 Redundant Sites Resu Ling from Mergers Looking just at the Cingular /F,T &T merger as an example, the new combined Cingular n 3twork had a combined total of approximately 52,000 site; , after the companies divested radio wave spectrur L and network assets in 13 cities in 11 states, as required by federal regulators as a condition of the sale. Of tN•se 52,000 remaining sites, approximately 20,000 are tower sites, owned by a handful of tower companies, :3nd 32,000 are non -tower sites. Of the non -tower sites, only about 17,000 are needed, leaving 15,000 redui idant sites to be terminated. F2F engineers are currently e1 aluating the networks to determine which sites to keep, based primarily on location, wireless coverage objectives and cost. In accordance with their agreements, landlords will be notified by the carrier if their site is scheduled to be terminated, Today, approximately 70 pertt nt of all cell site either support multiple carriers, or ar = located very close to sites supporting other major wirele. is carriers, As industry consolidation continues, a large percentage of operating sites today may be affected b changes ahead.